Tuesday, March 20, 2018

Hevea: Trading at Attractive Valuation

Results Update

For QE31/12/2017, Hevea's pre-tax profit rose 27% q-o-q but dropped 66% y-o-y to RM10 million while revenue rose 12% q-o-q but dropped 9% y-o-y to RM133 million. PBT rose q-o-q due mainly to the better performance at the particleboard sector as the planned annual preventive maintenance was done in the previous quarter. Profit after tax rose sharply due to a tax credit as the company recognized RM4.34 million of deferred tax assets arising principally from unabsorbed allowances on investment tax allowances available to the company less temporary differences in respect of excess of capital allowance over book depreciation.
(Note: Hevea's latest quarterly result was announced on 27 February.)

Table: Hevea's last 8 quarterly results

Graph: Hevea's last 41 quarterly results

Financial Position

Hevea's financial position is deemed healthy with current ratio at 3.7 times and total liabilities to total equity of 0.2 times.


Hevea (closed at RM0.93 yesterday) is now trading at a PE of 7.8 times (based on last 4 quarters' EPS of 12.03 sen). At this PER, Hevea is still deemed fairly valued. In addition, Hevea pays a decent dividend, with yield of 5.2%.

Technical Outlook

Hevea could be resting on its long-term uptrend line, SS at RM0.90.

 Chart: Hevea's weekly chart as at Mar 20, 2018_12.30pm  (Source: Malaysiastock.biz)


Based on improving financial performance, healthy financial position and mildly positive technical outlook, Hevea is deemed to be a good stock for long-term investment.

I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post. However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision.

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